Investment earnings surge in 2012 to 14.5%

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Investment earnings in the state's public pension system logged robust double-digit gains last year, but future unfunded liability expanded to $10.2 billion as the system grappled with lingering repercussions of recession, an official said Wednesday.

The Kansas Public Employees Retirement System reported a 14.5 percent net return on investment in 2012 and documented net returns during the current year of 14 percent, said Alan Conroy, executive director of KPERS. Over the past 25 years, the average annual return for the system is slightly above 8 percent.

Conroy told House and Senate members the gap between actuarial liabilities and assets increased by $1 billion last year largely because of deferred losses from the massive market collapse in 2008. It translated to a system funded in 2012 at 56.4 percent of future liability, a decrease from 59.2 percent in 2011.

Conroy said the industry standard was to achieve 80 percent funding of pension systems. A pension system falling in the 60 percent to 80 percent range is cause for concern, he said.

"If 60 percent and below — problem," he said. "The red flags certainly should be up on addressing that unfunded liability."

KPERS serves 156,000 active employees in state, local and school governments, as well as 84,000 retirees. Progress on the unfunded liability was derailed in 2008 when KPERS' returns plummeted 30 percent.

In 2012, the Legislature and Gov. Sam Brownback embraced reforms that increased employee and employer contributions and added a cash balance plan in 2015 to help with long-term solvency of the retirement system. The cash balance approach is a blending of the 401(k)-style option and the traditional defined benefit pension.

State lawmakers considered during the 2013 session, but didn’t embrace, the idea of converting KPERS to a 401(k)-style defined contribution plan.

Another discarded proposal involved issuance of $1.5 billion in bonds, which would have infused cash into KPERS in an effort to inflate earnings and more quickly reduce the liability. The bonding option is off the table at this juncture, said Rep. Steven Johnson, R-Assaria.

Johnson said rising interest rates on bond debt made the approach less appealing because it would be more difficult for the KPERS board of trustees to secure return on investment necessary to justify borrowing.

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They always neglect to tell us that the unfunded liability was at least $7 billion prior to the recession due to decades of the state funding KPERS below the actuarial requirement. They want us to forget that part. In 2005, the state started counting KPERS as education funding so they could claim they raised school funding. They neglect to mention that schools can't actually spend one penny of it.

Great post! It is disgraceful that the Legislators cheat all of us then try to cover their deceitful behavior with their caring statements as if we would believe anything they say. Then they wonder why we do not trust them.

The unfunded liability is the result of Legislators who did not keep their words to us. If this was private business the workers could sue their employer for this. Maybe the state unions can sue? It would take the Legislators a short time to pay this money if they took back the money they give to the wealthy and paid the bill they owe us.

A state pension formula exclusive to Kansas legislators assumes they work every day - all 372 days of the year.

As legislators wrestle to bring solvency to the Kansas Public Employees Retirement System, their annualized pay formula, based partially on non-existent days and pay, has not entered discussions.

Annualized pay

The Legislature opens its 90-day session on the second Monday of January. Typically, the Legislature concludes its regular session in early April and returns later in the month for wrap-up work that can take anywhere from less than a week to more than two weeks.

To determine a legislator's KPERS benefit, his pay is annualized, treated as if the job entailed full-time employment and full-time pay.

"Even though they only really earn that for several months of the year, they get credit for earning it all year long," Basso said.

For the legislator listing all income - the daily rate, subsistence and allowance - this is how annualization is calculated:

* $88.66 (daily rate) x 31 (days) x 12 (months) = $32,981.52

* $123 (subsistence) x 31 (days) x 12 (months) = $45,756

* $7,083 non-session allowance.

Altogether, that equals $85,820.52, and that's the pay figure that would be used for that legislator retiring now.

The Senate president and House speaker are at the top of the pay scale, and annualized pay for those posts could be as high as $99,859.74, depending on their enrollment choices, Mumert said.

Buying in

A legislator's actual yearly compensation is less than one-third of the annualized pay of $85,820.52, but his payroll deduction for KPERS is based on the annualized figure

Comparing pensions

A legislator retiring with an annualized pay of $85,820.52, and with 10 years' service, would have an annual KPERS benefit of $15,018.60, for a monthly benefit of $1,251.55, according to KPERS. If the retiring legislator had 20 years' service, the annual benefit would be $30,037.20, and monthly, $2,503.10.

The News asked some KPERS retirees about their pension benefits. Their answers varied widely.

A state employee who was a supervisor for juveniles on probation retired after 34 years with an annual benefit of about $25,000. A municipal wastewater treatment plant superintendent, with 24 years' service, estimated the earned benefit at $2,300 to $2,400 monthly.

A state social services worker in a supervisory role retired in 1995 after 15 years and draws a monthly KPERS benefit of $524. That is equal to the monthly benefit for a county-level commercial appraiser who retired at 65, vested at nine years with KPERS.

They could be successful businessmen/women. A goverment is not a business though. The motivation of a business is to make money by lowering expenses and selling prodcuts as much as possible. Some times that is premium products at premium products. Sometimes they scrap quality to make a price point because people will buy cheap and disposable.

Government is not efficient, it should be small as possible, but where it is required you can't run it like a business. This is my argument against both Rep and Dem. Goverment should only do what it must and it sure as heck should not be run like a business.

Your statement is a good one for people who have money. Most state employes get paid only enough to get by. There is no extra for "outside" investments. The problem with business men/women as Legislators is they try to run government like business--get the most money for the lest amount of cost. That means paying the people who produce your product the least amount of money they can get away with. The people above who state government is not business is correct. They should treat the lower line workers as they treat themselves. Of course that will never happen. After all they place themselves above all, even the law. They are like Nixon. "If the President does it it is not illegal". Except they put Legislator in the place of President. They can not except the courts holding to the law, ie the court ordering them to pay schools per their own laws. That is why they are packing the courts with Conservatives. If the school issue comes up in front of Caleb do you think he will vote per the people he owes his fat paycheck to? Or will he will feel a duty to pay back his favor owed?